Who is it for?
Investors wishing to reduce the potential IHT on their estate, who have no less than £500,000 to invest and who may additionally have major capital gains to shelter. Typically entrepreneurs who have already sold or plan to sell their businesses.
What does it do?
Roll-over Renaissance rolls over the clients taxable gain into a new investment thus deferring the payment of any tax charge. Capital Gains Tax charges already incurred and paid can be reclaimed from the Inland Revenue so long as the reinvestment takes place within three years of the date of the gain.
Additionally under the Business Property Relief (BPR) rules, provided the bespoke company shares are held for the qualifying period, the investment should fall outside the client’s estate for IHT purposes. IHT efficiency is often of paramount importance for individuals who have recently realised the proceeds of a private company disposal.
How does it work? The client invests in a bespoke company that is established on their behalf. The trade of the company is carefully selected so that it offers the attractive combination of asset backing and Enterprise Investment Scheme (EIS) qualification.
In order to retain the tax benefits of the investment it is necessary for the bespoke company to carry on its trade for a minimum of 3 years.
Types of Investment available
A number of asset backed trades where disqualified from EIS relief a few years ago but there remain some attractive options: Pubs, Children’s nurseries, Garden Centres and Health and Fitness Clubs are all businesses which can be accessed together with experienced management teams.
Cost
Depends on size and nature of investment.
Risks
Tax Risk – Low. The planning relies on a positive provision within UK leiglation therefore this is not aggressive tax planning.
Investment risk – high. Naturally investments in unquoted private companies should be considered high risk. However, the risk is mitigated as described above by
(i) Asset backing
and
(ii) Experienced management teams.
